Alibaba-backed Zhipu raises $140 million as DeepSeek heats up AI

Chinese startup Zhipu raised more than 1 billion yuan ($140 million) in a financing round led by local government-backed firms, underscoring the growing interest in domestic AI following DeepSeek’s ascent.

Participants in Zhipu’s latest funding included Hangzhou Municipal Construction Investment Group Co. and Shangcheng Capital, both controlled by the government of Hangzhou — DeepSeek’s home town. They joined existing backers Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Zhipu, last valued at about $3 billion during a May 2024 round, disclosed its latest financing and investors in a WeChat statement without going into further detail.

DeepSeek rekindled interest in China’s AI and tech scene after debuting in January an AI model deemed to surpass some of the best the West has on offer, but at a fraction of the cost. 

AI developers from Alibaba to Baidu Inc. have since sped up efforts to advance their large-language models, intensifying competition both at home and with US rivals such as OpenAI and Meta Platforms Inc. Baidu is planning to offer about 10 billion yuan of bonds offshore, Bloomberg News reported Monday.

Still, the investment in Zhipu comes after it was added to another trade-restrictions blacklist by the US Commerce Department in January, which threatens to impede access to critical technology. The Chinese startup has denied alleged links to the Chinese military.

“We will unveil new models this year and open-source them,” Zhipu said in its WeChat statement.